The Wall Street was created to support economy and to help it grows. It looks like now it's opposite - the economy has to support the appetite of the Wall Street and when the economy fails to do so we have stock market crash. That is why we need regulations. The stock market is not as it was a century years ago, it's not even as it was 10 years ago. The volume traded on the US stock market more than doubled over the last 10 years. Did the economy become better??? Maybe... but I'm not sure it's twice better as it was a decade ago... So, what is the source of increased trading volume - my answer is speculators (which includes me as well). That is why I think this is a time for some increased regulations against speculators (against me). When the market becomes driven by speculators and not by economy then the Wall Street may destroy the economy - this is my opinion.
Right now, I'm talking not as a trader, because what I'm taking about is against the trader's nature. The greedy buying and especially panic selling has to be under the control of the regulations. Otherwise we will have bubbles (like internet bubble in 2000) followed by stock market crashes. Nobody talks about that, yet we had bubble again and now it was in the mortgage sector. Because the mortgages became tradable commodity the demands on them increased and when the economy was not able to support the Wall Street demands the mortgage bubble has collapsed...
We will not be able to avoid bubbles and crashes. This is the nature of the free stock market. By having bubbles and crashes the stock market self regulates itself by helping the economy to move in the right direction. However, the free market is very attractive to the speculators and that is why the regulations are needed, without them we will have even bigger bubbles and more extreme stock market crashes. Especially more extreme crashes, why, because a speculators make more and faster during the stock market crash (market is more volatile).
The economy has to be protected from the situations when speculators are selling short stocks (stocks they do not have) in huge numbers - this creates a demand on the bear market and may turn a healthy down-trend into the global disaster. How to do it - this why we have government and all the institutions including SEC. Yet, it looks like they do not work in this direction... From my side I may say that even simple rule may help. For instance "In situation when the DJI drops for more than 3% in a single session, none of the traders or funds managers should have more the $10M in short position within the next week. Those traders who has more than $10M in short position on the moment when the rule is triggered, has to cover extra within the next trading session." It's simple: the market is still free, the crash is still possible because if you own stocks and you want to sell in panic it you may sell it and you may sell as much as you have. Yet if you want to sell short in order to profit on crash your greedy selling abilities are limited and your short trading activity will not affect the market.